What is the auditor's responsibility regarding the design of audit procedures for Augusta Lawn Care?
Augusta_Lawn_Care Franchise · 2025 FDDAnswer from 2025 FDD Document
Augusta Lawn Care has the right during normal working hours to audit Your books and records, including Your tax returns with respect to the Augusta Lawn Care Business. If an audit discloses an underpayment of royalties, advertising, or other fees payable under this Agreement, You shall immediately pay these amounts to Augusta Lawn Care, together with accrued interest on the amount underpaid in accordance with Section 6.9 of this Agreement. In addition, if the underpayment exceeds two percent (2%) of the total royalty, advertising, or other fee payable for any period covered under the audit, You shall reimburse Augusta Lawn Care for all expenses actually incurred by Augusta Lawn Care in connection with the audit, including reasonable attorneys' fees.
Source: Item 23 — RECEIPTS (FDD pages 44–184)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, Augusta Lawn Care retains the right to audit a franchisee's financial records. If an audit reveals underpayment of royalties, advertising fees, or other fees, the franchisee is responsible for immediately paying the owed amount along with accrued interest as detailed in Section 6.9 of the agreement.
Furthermore, should the underpayment exceed two percent of the total payable royalty, advertising, or other fees for any audited period, the franchisee is obligated to cover all expenses incurred by Augusta Lawn Care during the audit. This includes reasonable attorney's fees, adding a significant financial burden on franchisees found to have underreported payments.
However, the FDD does not specify the auditor's responsibility regarding the design of audit procedures for Augusta Lawn Care. A prospective franchisee should seek clarification from Augusta Lawn Care regarding the specific standards, procedures, and scope of these audits to fully understand their obligations and potential financial risks.